South Africa Proposes Law to Give State Share of Oil Projects

Jan. 18 (Bloomberg) -- The South African government has
proposed changes to an energy law that would enable it to secure
free stakes in all new oil- and gas-production projects.

The planned amendments to the Mineral and Petroleum
Resources Development Act also aim to secure the state the right
to appoint two directors to the board of companies operating new
energy projects and to abolish the petroleum industry regulator.
The changes, if approved by Parliament, could have repercussions
for companies such as Exxon Mobil Corp., the largest U.S. energy
producer, and Royal Dutch Shell Plc, which intend prospecting in
South African waters.

The law didn’t specify what size stake the state would take
in new energy projects and it was unclear how the provisions
will work in practice, said Peter Leon, the Johannesburg-based
head of Africa mining and energy projects at law firm Webber
Wentzel.

“These proposals are extremely negative for the industry
while surrounding countries continue to benefit from an
exploration boom,” he said in an e-mailed response to questions
today. “No obvious reason has been advanced for the abolition
of the Petroleum Agency of South Africa and the transfer of its
all responsibilities to nine regional managers of the Department
of Mineral Resources.”

South Africa had proven oil reserves of 15 million barrels
in January 2011, located to the south and off the west coast
near the Namibian border, according to Oil and Gas Journal.
International energy companies have becoming increasingly
interested in exploring South African waters as new technology
boosts their ability to find and pump hydrocarbons from deep
underneath the seabed.

“The pressure should be on the government to support the
industry,” Claude Baissac, the founder of country-risk
consultants Eunomix, said in a phone interview from
Johannesburg. “We see no sign of that. This draft legislation
is hopelessly out of tune.”